Do you need a loan but have a poor CIBIL score? Usually, lenders look at your credit score to determine how likely you are to repay the loan. So, getting a personal loan for bad credit seems to be next to impossible. But don’t worry. There are loans for bad credit as well. Loans that have been created exclusively for borrowers with poor or even no credit score are referred to as bad credit loans. So, how can you get a personal loan despite having a poor credit score? Read this blog to learn some strategies you can try to get a personal loan!
But why is your credit score low?
Numerous reasons affect your credit score. Here are 5 top reasons that cause your low credit score—
- You have not paid back any debts.
- Your attempt to get credit or a loan was unsuccessful before.
- You have a history of borrowing money and making late payments.
- You have never borrowed money before, and you have no sound financial management history.
- You wouldn’t have been able to pay your bills.
How to get a loan for a bad credit score?
Here are 5 tips for you to get a personal loan despite having a bad credit score:
1. Look for a lower personal loan
First of all, if you have a low CIBIL score, don’t expect to get a high loan amount. This will indicate risk for the lender, and your probability of loan approval decreases. So, look for low-amount loans which are easier to repay.
2. Try to justify your earnings can support EMI
If you recently got a salary hike or a promotion, this means your finances are in a better state. Or even if you have a side hustle that brings an extra income to you, that is a plus point. This will help you justify your income and how you can quickly pay off your loan and EMIs.
3. Apply jointly with another person or provide a guarantor.
You can avail of a personal loan jointly with a co-applicant or look for a guarantor. For this, you need your co-applicant to complete their KYC formalities. If your co-applicant or the guarantor has secure finance, the lender might approve your loan.
4. Provide collateral for the loan
Your chances of obtaining a loan increase if you are ready to provide collateral like jewellery or any property. This is because it lowers the lender’s risk in lending to you. As a result, lenders are willing to lend to you because they know that if you collapse, they can sell or auction the collateral to recoup the loan’s outstanding balance.
5. Analyse your credit score
Not everything on your CIBIL report is accurate. Many a time, there are some errors in your CIBIL report. One of the common mistakes is a failure to update the latest information in your record. And the slightest mistake might harm your credit score. So avoid this by checking and analysing your credit score regularly. Then, if there are any mistakes, ensure to correct them at the earliest.
These strategies will definitely help you avail of a personal loan despite having a low credit score. First, ensure you have enough money to repay the loan, or your credit score can decline further. But an even better option is maintaining your credit score by handling your personal finances strategically. Don’t let your credit score go down by negligence in your financial management.
